Recently in Finance Category

• Hogan/Lovells
• Sonnenschein/Dentons
• Squire Sanders/Hammonds
• Proskauer/Berwins

Question:  Which of these four does not resemble the others?

While you're thinking about that...

As LegalWeek described the Hogan/Lovells deal at the time:

Aside from its banking and corporate practices, the combined firm will be strongly represented in  regulatory, antitrust, intellectual property, real estate and litigation.

[Warren] Gorrell [chairman of Hogan] told Legal Week: "We are putting together a new kind of firm - not a Washington or UK-based firm but truly a different kind of firm."

"The proposition is unique - we will be able to attract new business going forward," said [Lovells managing partner David] Harris. "We will have scale and a profile that will be much more powerful."

The deal will see the firms keep two operational centres, one in London and the other in Washington DC - rather than opting for a single base, with a total network of 40 offices with wide coverage in the US, Europe and Asia.

The points to note about these statements, carefully crafted as they are, are that (a) no mention is made of New York; and everyone knows that the (b) the fundamental strength of the combination remains in litigation and not transactional matters.

Sonnenschein/Dentons?  Again, from the trenchant analysis of LegalWeek (emphasis throughout supplied):

Even the charitable would say both Dentons and Sonnenschein have not hit their stride over the last decade, having failed to quite keep pace with their peer group. On most financial benchmarks, Dentons has been the least impressive performer in its division in recent years and, as such, the 2000 tie-up between Wilde Sapte and Denton Hall must be judged a disappointment. What was by some measures the UK's eighth largest legal practice at the time of the union had fallen to 20th in revenue terms by 2009. And while Dentons had shrunk considerably since the 2000 deal, its profits have also substantially lagged rivals, even with this year's 20% jump in PEP to £360,000 (average PEP for a UK top 50 law firm in 2009-10 will almost certainly be well above £500,000). The years following the deal also saw the closure of its Asia network and the break from its European network.

But perhaps the clearest indication that the UK firm has struggled to live up to its potential comes from casting your mind back to the 1990s and the reputation of the legacy Wilde Sapte. This was one of the most respected banking outfits in the City, a practice that developed names like James Johnson and Nick Syson. It was also the firm that came within a whisker of merging with Arthur Andersen in a deal that clearly unnerved the magic circle until the big five accountant walked away at the 11th hour. A credible case could be made that even merely the spectre of the Andersen/Wilde Sapte union was enough to galvanize the magic circle into the revolution that turned the group into genuinely global powers. If you accept that analysis, then Wilde Sapte has been one of the most influential practices in the UK legal market of the last 25 years, even if it failed to benefit from its own vision.

With that legacy, it seems both sad and fitting that the Wilde Sapte name should now disappear. Back in 2000 the idea that a firm of the pedigree of Denton Wilde Sapte would hook up with Sonnenschein - which remains best known in the UK for pulling the plug on its City arm a decade ago - would have seemed unthinkable, but it's time to move on.

LegalWeek has to be kind, but its commenters do not, and while I put zero to less-than-zero stock in anonymous comments, this deal came in for some of the more vituperative criticism I've seen lately, among which "two drunks holding each other up" was one of the more kind.  The opinions reflected in comments are not necessarily those of Adam Smith, Esq., or its management.

And, squaring the circle, this LegalWeek coverage of Squire Sanders/Hammonds:

But the greatest point of comparison is the essentially defensive nature of the tie-ups. If you were to take a 10-year view of the UK's top 25 law firms, judged purely on the numbers, Hammonds and Dentons would be the two firms that have most struggled to deliver on their considerable promise. Indeed, it speaks volumes about the reverses that have beset Hammonds over the last decade that many now forget what a hugely potent brand the firm once was. Go back to its mid-1990s heyday and it was the then Hammond Suddards that many were betting would prove how far a regionally-bred law firm could go, not Dibb Lupton Alsop (which went on to become the DLA in DLA Piper).

The loss of that status was quick and not pretty: heavy expansion costs and a City office that struggled to gain traction strained Hammonds' finances. Soon the firm was facing an exodus of partners, overpaid drawings and plummeting profits, a situation which culminated in the firm's decision in 2005 to put in place a partnership lock-in to stabilise the ship.

While some were expecting such tactics would fail, it is to the great credit of the firm and in particular managing partner Peter Crossley, who was on the first wave of the clean-up crew, that the doubters were proved wrong. Over the last five years the firm has continued to play a tough hand extremely well, but there has been no escaping the feeling that Hammonds wasn't going to regain its former vigour without doing something large and structural. Enter Squire Sanders (which had informally discussed a tie-up with Dentons before the Sonnenschein deal).

Despite having built a large US practice and a comprehensive network across the Central and Eastern European region, Squire Sanders has a few issues of its own. Its profits per equity partner for 2009 of $795,000 (£521,000) are well ahead of Hammonds' 2009-10 figure of £364,000, but that remains well below the $1.2m (£774,000) average across the Am Law 100. The firm, which last year saw veteran chairman Thomas Stanton hand over to James Maiwurm, has explored a number of mergers over recent years without closing a significant foreign deal.

Yet if the proposed tie-up is defensive, that appears strongly in its favour. It's an irony of strategic unions that deals done in such circumstances tend to do better than mergers between firms on a clear upward slant. Mergers often flounder because two sides believe in their own superiority and refuse to integrate, promoting an insidious wistfulness for the good old days. There's nothing like a nice run of calamities and dead-ends to make one constructively minded, helpfully self-critical and focused on the future. Perhaps all law firms considering a merger should engineer a few disasters before hand to sharpen their resolve.

There is one interesting wrinkle that is worth noting with the deal: the 436-word statement the firms issued announcing the talks, aside from making the mandatory nods to'global coverage', 'shared culture' and 'ambitious aims', also makes no less than four separate references to providing value or cost-effective services. As an explicit aim it should give the combined practice a little more distinction since many law firms see going global as a means of escaping domestic price pressures.

This leave us with, yes, the Proskauer/Berwin merger (talks have been confirmed on both sides, but the deal is clearly not finalized).  Berwin was among the hardest-hit City firms in the downturn because of its concentration on private equity and commercial real estate, but Proskauer also has a strong private equity practice and that sector, while down, will never fundamentally be out.

So why do I nominate this as the one of the four that does not resemble the other four?

Three key reasons:

• It would put together a heavily New York-centric firm with a heavily City-centric firm, creating a footprint with 400 lawyers in each trans-Atlantic financial capital; and
• The resulting firm would have a strong corporate focus (albeit with smaller, but high-powered, litigation capabilities on both sides of the pond).
• I can't think of a comparable offering in the marketplace.

Isn't this, then, on a less celestial scale, the long-rumored Freshfields/Sullivan & Cromwell deal?  Two very strong corporate practices, New York and London-based, offering something new in the marketplace to clients?

All I can say to you, by the way, if you're still awaiting the Freshfields/S&C deal, or its functional equivalent, is please introduce me to your fast-forward future time machine, because I would love to experience it.

Finally, the Proskauer/Berwins deal strikes me as client-oriented rather than firm-oriented:  It seems designed to create a firm with capabilities that aren't readily replicated elsewhere among its peer group, or otherwise, and if it's grounded in any internal sense of urgency on either side to "do a deal," I just don't see it.  Witness the protracted period of contemplation, discussion, and, presumably, massaging the respective partnerships, both of whom are known to be strongly democratic, Quaker-meeting-ish (in the good, consensus-driven sense).  Deals done of desperation aren't paraded in front of the public for months; they are typically announced days or weeks before the obligatory partner vote, with, one can only assume, names taken of those voting against, for future reference.

The other dimension in which the Proskauer/Berwins deal does not resemble the others, of course, is that it hasn't happened.

You now know where my money is riding on that score.

On Tuesday, October 5, I'll be facilitating a workshop here in New York at the AMA Executive Conference Center (1601 Broadway @ 48th Street, entrance on 48th) on What You Need to Know to Make Alternative Fee Arrangements Work. 

Richard Wyatt, co-head of litigation at Hunton & Williams, will also be a key presenter, along with others.

More information is available here. 

Hope to see you there!

Many people underestimate the contribution disease makes to the economy. In Britain, more than a million people are employed to diagnose and treat disease and care for the ill. Thousands of people build hospitals and surgeries, and many small and medium-size enterprises manufacture hospital supplies. Illness contributes about 10 per cent of the UK's economy: the government does not do enough to promote disease.

--John Kay, writing on the Op-Ed page of The Financial Times. 

Tongue-in-cheek, almost surely, you are telling yourself, but how exactly?

Such reasoning is identical to that of studies sitting on my desk that purport to measure the economic contribution of sport, tourism and the arts. These studies point to the number of jobs created, and the ancillary activities needed to make the activities possible. They add up the incomes that result. Reporting the total with pride, the sponsors hope to persuade us not just that sport, tourism and the arts make life better, but that they contribute to something called "the economy".

The analogy illustrates the obvious fallacy. What the exercises measure is not the benefits of the activities they applaud, but their cost; and the value of an activity is not what it costs, but the amount by which its benefit exceeds its costs.

He rightly calls the strained and implausible efforts to justify the contributions of sports and art to the economy--by pointing to the people employed to do everything from build the stadiums to clean up after games, or to selling snacks and drinks at intermission of the theater or opera--"bad economics."  And that they surely are.

Good economics here, as so often, is a matter of giving precision to our common sense. Bad economics here, as so often, involves inventing bogus numbers to answer badly formulated questions.

But good economics is often harder to do than bad economics. It is difficult to measure the value of a Shakespeare play: you can start with the box office receipts, but this is only the beginning of the story. Adding up the actors' wages does not help. Changes in relative prices since the time of Verdi mean that grand opera is now very expensive to perform. The relevant economic questions are whether the cultural and commercial value of the performance offsets these costs and whether these benefits can be translated into a combination of box office receipts, sponsorship and public subsidy. The appropriate economic criterion, everywhere and always, is the value of the output. [emphasis supplied]

But bad economics has been allowed to drive out good.

Swell, you may be thinking, but law (our colleagues' occasional hyperbolic and overly enthusiastic claims to the contrary notwithstanding) is neither a sport nor an art. 

So what does this mean to us?

The key is that the "appropriate economic criterion...is the value of the output."

Meaning that the appropriate economic measure of what lawyers and law firms do is..."the value of the output."

Permit me to state the obvious:  That is not the way the billable hour works.  The billable hour has its feet firmly planted in cost of production, not value to client.  It is therefore, economically speaking, almost ipso facto going to diverge from "value," and thus be an erroneous way of pricing legal services.  Sometimes the law firm will get lucky--a high fee for poor service--and sometimes the client will get lucky--a low fee for extraordinary service--but the revenue model is intrinsically, conceptually, mistaken.  Cost may tie to value occasionally--it should, of course, always be lower than value--but only as a result of running what are essentially an enormous number of experiments on client matters, every day, all the time.

This makes no more sense than lobbying for greater support of "disease," on the basis of its contribution to economic activity.

Ward-level political wisdom has long held, of course, that "you can't beat somebody with nobody," and that may, alas, be where we too often find ourselves vis-a-vis the billable hour.  We may not like it, but as long as the alternative is "nobody," we will re-elect, and re-elect, and re-elect, the billable hour.

I suppose it beats electing pestilence.

The Dodd-Frank Wall Street Reform and Consumer Protection Act is momentous.  According to Davis-Polk,

• It represents the greatest legislative change to financial supervision since the 1930s (few would argue on that score)
  
  
• This legislation will affect every financial institution that operates in this country, many that operate from outside this country and will also have a significant effect on commercial companies.

David Brooks nicely summed up the scope of the bill in historical perspective:

The law that originally created the Federal Reserve was a mere 31 pages. The Sarbanes-Oxley banking reform act, passed in 2002, was only 66 pages. But the 2010 financial reform law was 2,319 pages, an intricately engineered technocratic apparatus. As Mark J. Perry of the American Enterprise Institute noted, the financial reform law is seven times longer than the last five pieces of banking legislation combined.

Once again, government experts were told to take a complex, decentralized system -- in this case the financial markets -- and impose rules, rationality and order. The law creates one über-panel, the Financial Stability Oversight Council. It directs government experts to write rules in 243 separate areas.

Randall Guynn, financial institutions head, Davis Polk & Wardell: "We've been active advising the Securities Industry and Financial Markets Association and several leading US and non-US banks on financial regulatory reform. Those representations have kept us very busy during the past year, but we expect our work to increase substantially during the regulatory implementation phase."

Ernest Patrikis, bank and insurance regulatory partner, White & Case: "I expect the Dodd-Frank Act to result in an increase in work over the next several years. Initially, questions will arise regarding the statutes and its ambiguities and alternative ­interpretations. The federal supervisory/regulatory agencies have been granted a great deal of discretion that will be reflected in proposed regulations. Those regulatory proposals will result in increased activity."

William Sweet, finance and regulatory partner, Skadden: "My practice focuses on financial services regulation, which is the predominant theme of the bill. We've seen, and expect to continue to see, a significant increase in client demand for advice on matters covered by the Dodd-Frank Act."

Bradley Sabel, finance and regulatory partner, Shearman & Sterling: "Although near-term work volume isn't likely to expand significantly, we expect that the volume of work relating to the bill will pick up as proposed regulations are issued for comment and adopted, and even more so when final regulations are issued."

For those of you in the New York area, or who might be here the first week of October, here's a heads-up about a day long conference on the topic of alternative fees that Adam Smith, Esq. will be hosting and which we developed, and we warmly invite you to attend.

Here's the summary of what it's about:

There has been much hand-wringing and ink spilled on the topic of AFAs. Will they take over? What do they look like? What permutations do they come in? Aren't they just "code" for clients demanding discounts?

Is the billable hour dead?

Unfortunately, most of these discussions have provided far more heat than light. It's time to demystify matters.

It's probably safe to say that AFAs are more complicated than the billable hour. That said, they are not intrinsically hard and they are most definitely not mysterious.

Most industries, including professional service firms, profitably manage the necessary resources to deliver effective, efficient, predictable solutions to their clients. The law is no different. (Indeed, it's the heavy reliance on the billable hour which is distinctive to law firms.)

What most discussions about AFAs have left out is what law firms need to do - and, yes change in order to be able to offer their clients a menu of pricing options, including AFAs.

Above all, with AFAs, firms (and clients) need to be willing to experiment. The genius of the scientific method is that you learn things even from experiments that fail. "There's a reason we call it research; we don't know what we're doing."--Albert Einstein.

This one-day workshop is intended to address that void - both in terms of how law firm models may need to change and implementation requirements and challenges.

Let's agree that AFAs are here to stay. Now what?

The goal of this is not to be your typical (forgive me) series of static talking-head presentations, but to be a genuinely interactive and participative workshop-like event where we can get well past the gallons of ink that have been spilled on whether or not AFAs are "coming" and start to deal with, "So now what do I and my firm do?"

What you need to know:

• Date & Time: Tuesday, October 5, 2010: 8:30 am - 5:00 pm
  
  
• Location: AMA Executive Conference Center, 1601 Broadway (48th Street, Crowne Plaza Hotel--north side of 48th, between Broadway and Eighth Ave), New York
  
  
• Topic: What You Need to Know to Make Alternative Fee Arrangements Work
  
  
• Key Contributors:
  • Tom Clay, Principal, Altman Weil, Inc.
  • Jim Hassett, Ph.D., Founder, LegalBizDev
  • Janet Stanton, Partner, Adam Smith, Esq.
  • and of course yours truly.
    
    
• Agenda:
  
  
  • Varieties of AFAs
    
    
  • Implications of AFAs for law firm structures
    • Structural & strategic
    • Implementation & execution
      
      
  • Intersection of AFAs with project management and financial reporting and analysis
    
    
  • Implications of AFAs for client relationship development

Registration and more information is here.

Please note that there's a 15% discount for signing up before August 31.

Hope you can make it! Please let me know if you have questions, and do me the favor of shooting me a quick heads-up if you'll be there.

Outsourcing is here to stay. Whatever you call it, and whatever you think of its quality, clients have tasted of the fruit of the forbidden tree and they're not going back. If document review can be conducted by Ivy League law school grads trained at white-shoe and Magic Circle firms for $50/hour instead of $350/hour, what's not for a client to like?

Of course, "outsourcing" comes in many forms. Essentially, there are two dimensions to dividing this world, providing the always-handy matrix:

	Foreign	Domestic
Owned	Clifford Chance/India	Orrick/Wheeling, WV
Rented	Integreon	Axiom

The population of the cells in this table is, rest assured, by no means exhaustive; it's merely indicative and representative. (PR people for omitted firms, please hold your fire!)

The point is simpler: Every cell of the 2x2 matrix is occupied, and betting people would put money on the population of each cell growing, not diminishing.

A particularly interesting firm, which has ambitions you may deem admirable or frightening or a combination thereof, is CPA Global, which bills itself as the world's leader in legal process outsourcing, and which raised a mere $700-million in a private placement in the UK this past spring. For that nice sum, the investors got what? 49%. Not even control. This is a war chest on a scale the AmLaw 10 and the Magic Circle, put together, would be very hard-pressed to match. And they'd probably have to cede control.

So far, that's merely reality.

The more interesting question is, What do you do now?

Last month, McKinsey published an article called When companies underestimate low-cost rivals, which poses the dilemma thus:

When low-cost competitors appear, one of the toughest decisions facing executives in companies with premium products and brands is whether to respond. Should the company or business unit adjust its strategy to meet the low-cost threat or should it continue business as usual, with no change in strategy or tactics?

Of course, Clayton Christensen famously wrote about this topic in general in The Innovator's Dilemma, which I always thought should actually be titled either The Innovatee's Dilemma or The Incumbent's Dilemma.  Established firms are at existential risk of ignoring or surely underestimating the nature and magnitude of the challenge, and the crux of the dilemma is that the risk arises precisely from the incumbent firms doing what they ought to be doing, namely focusing on their existing clients and existing competitors. 

As if that weren't bad enough, there's another dimension to the challenge posed by young and initially quality-compromised,  unworthy, upstarts:  It's not just that they can steal market share from the relatively small slice of clients who are extraordinarily price-sensitive, it's that they can slowly change client behavior.

As an example, McKinsey cites the entry of low-cost European airlines--Ryanair, easyJet, et al.  It's not just that they have taken market share from British Air, Air France, Lufthansa, etc., it's that they've changed passenger behavior.  People now think nothing of going abroad for the weekend, or even of commuting to another country for the workweek and returning home, by air, every weekend. 

Another challenge is that down-market upstarts can, accretively and incrementally, begin to move upmarket. EasyJet has adopted this strategy, leaving Ryanair at the rock-bottom price point. In the US, Southwest may be moving in a similar direction to EasyJet; they've introduced some (modest, to be sure) upscale alternatives such as a "Business" offering that permits priority boarding for a fee.

This is where it really begins to get dangerous in law-firm land.

As McKinsey drily reports:

Customers are often quite keen to have more competition among suppliers and in some cases help low-cost suppliers upgrade their offerings by providing information and support.

The ambitions, and business strategy, of CPA Global and their ilk are no secret: Bypassing law firms altogether and marketing their offerings directly to clients. If another word for outsourcing is disintermediation, welcome to the ultimate disintermediation: They would like to take the law firm out of the equation altogether.

Before you throw up your hands and stop reading, consider the smoothness of the upward-rising curve of value in all the integrated services law firms provide. Ooops: Did I say integrated?

Traditionally that has surely been so, and there are arguments why all those services should come from one firm, but if the economics of chunking up those services and mixing and matching providers become compelling enough, sophisticated GCs may feel it worth a rethink.

For example: There are clear benefits to having the same team of lawyers that reviewed the critical documents prepare the witnesses and draft the briefs applying case law to the anticipated facts. But if all those activities are being performed at New York (or San Francisco, or Chicago) rates, the benefits of that integration better be strong. Because the CPA Globals of the world will offer to review the documents and deliver witness and exhibit binders at Bangalore, or at least at Fargo, rates.

And this is precisely where the independent outsourcing firms can have an impact. Once clients begin to get accustomed to the notion of being able to unbundle, or unchunk, legal engagements-be they disputed matters or transactional ones-there's potentially little end to it.

First, clients hire, or "request" (read: demand) that you hire an outsourcing firm for, say, document review. Next, the outsourcing firm makes it known that it can prepare witness binders, and next, that it can aid in the preparation of witnesses.

Do they threaten the Supreme Court appellate practices, the white collar crime practices, the top-tier M&A, government investigatory or regulatory inquiries, etc.? Not on your life. But might they cause us to have to engage in serious re-examination of all the components of our business model? Here it comes.

The bad news is that the days of charging $300/hour to have Ivy League graduates review documents are over, but the good news is that that mind-numbing experience will no longer be a rite of passage and you might actually have to provide your associates with more interesting work clients will pay for. In the bargain, your associates will be speeding their development into becoming real lawyers.

---

This exposes the intersection between low-cost competition and the need for accelerated evolution of your firm's core business model in the wake of the Great Reset. Ask yourself what are the implications of the following aspects of the new normal, taken together:

• Associate recruitment, and attrition, are down.
• Associate/partner leverage is probably in decline to a new, lower plateau.
• Clients are increasingly effective at insisting that associates deliver tangible contributions to matters if the firm expects to charge for them.
• And as we've seen, clients averse to paying our retail rates for our traditionally bundled services have new alternatives, the providers of which fully intend to move up the value chain.

I would argue the implication is clear ("stark," if you prefer, but as for me, I'd choose "energizing,"or maybe even "chance of a lifetime"): our associates--indeed, your entire team--needs to move up the value chain even faster than your new competitors.

Serendipitously, the new normal landscape features far more favorable conditions in which you can do so:

• Fewer associates, with less attrition, means each must be more valuable to the firm (scarcity: economics 101)
• Enabling you to invest more in their professional development
• While they are freed from the intellectually vacuous scutwork of the past
• And as ever more powerful, sophisticated, and nuanced technology finally transforms Knowledge Management from a backwater (or a dream, or an irrelevance) into a daily, real world tool for professionals.

Finally, you might be surprised to hear that this all invites reflections on why your firm exists in its current configuration, and the market's tolerance for it to continue in that form.

In 1937, Ronald Coase wrote one of the most famous, and shortest (a dozen pages or so) articles, The Nature of the Firm, for which he decades later won the Nobel Prize, in which he explained why firms exist at all.

Why create the management overhead, bureaucracy, and administrative friction entailed in any firm of scale? Why not just purchase whatever is needed, when it's needed, on the open market?

Coase's answer was that large groups will enjoy a systematic advantage over smaller ones when large-scale coordination is called for, using skills organized more effectively and economically through personal interactions than through the market, with its inevitable transaction costs.

As globalization and technology have diminished these transactions costs, the need for your for to continue to demonstrate its economic and market superiority is under stress.

Your response must be to assume the mantel of an innovator within your own walls. Because the innovators outside your walls are coming.

 

[Linklaters Managing Partner Simon] Davies said the firm was focused on overall profitability rather than its revenue, which has suffered due to the deflated M&A market with about 40 per cent of income generated by the corporate department.

"Our objective has never been to maximise our revenue," he said [emphasis supplied]. "We're not focused on being the biggest firm by revenue but on being the leading firm as far as our clients are concerned."

--From The Lawyer story announcing Linklaters' 2009-2010 results, showing a decline of 8.8% in revenue to £1.18bn and also a decline of 6.88% in PEP to £1.21m.

This raises the question:  If not revenue, or if not PEP, what are the optimal metrics on which to judge law firm performance?

Orrick famously announced back in May that it would cease "using or reporting, internally or publicly, the metric of Profit Per Equity Partner."  And on the heels of that announcement I wrote about some alternatives I might endorse.  The list included:

• On the quantitative side:
  • Revenue Per Lawyer
  • Compound annual growth rate (CAGR) of revenue over a multi-year period
  • Realization rates (implying, I would argue, clients' perception of value-for-services-received)
  • Associate retention rates (or attrition rates, measured negatively)
  • Percentage of business from clients of long-standing duration (say, more than 3 or 5 years)
  • Percentage of all legal spend from top 10 (20/50/100) clients
    
    
• On the qualitative side:
  • Client satisfaction
  • Lawyer morale
  • Commitment to and investment in professional development
  • Commitment to and investment in such things as diversity and pro bono
  • The quality of firms the firm takes lateral talent from and the quality of firms they lose lateral talent to
  • The quality of firms the firm wins assignments from and the quality of firms they lose assignments to
  • Quality and morale of professional and support staff.

Most importantly, however, I believe we as a profession and as a management class need to stop genuflecting to the one-size-fits-all model of law firm performance.

What do I mean by that?

Simply that firms are increasingly segmenting themselves into different market positionings, and that applying one, or even a few, unitary  metrics across firms pursuing avowedly different strategies is guaranteed to produce misleading--and downright odd--results.

For example, much as I respect Simon Davis, I think being part of the Magic Circle means that you are, among other things, judged on overall size, that is to say, on annual revenue.  Who would claim that a firm with half, or one-quarter, of the revenue of Allen & Overy, Clifford Chance, Freshfields, or Linklaters would seriously be viewed as on a par with those?  In this league, size does matter.  (Which, among other things, is why Slaughter & May is not "really" a Magic Circle firm, or at best is one with an enormous bold asterisk after its name.)

Another set of firms--and yes, folks, we can name names--including Cravath, Slaughters, Wachtell, Weil Gothsal, and perhaps some relative newcomers such as Boies Schiller or Quinn Emanuel, positively invites us to compare them on the basis of PPEP.

Yet another set would like us to find them strong in global coverage:  Say, for example, Baker & McKenzie, DLA, Jones Day, Latham, Sidley, and White & Case, with a slightly newer orientation to the "global" value proposition represented by K&L/Gates, Orrick, and Reed Smith.  (Caveat, folks:  The trouble with naming names is you've named some people and you haven't named other people.  That's why letters to the editor are available; and I urge you all to exercise your right to add, subtract, and in general dissent.)

Another, separate, problem with cross-firm metrics has to do with averages.  Averages mislead.  Yes, seriously.  (In my original piece on this I used the familiar example of "Bill Gates walks into a bar....", and the average net worth in the place goes up to $5-billion.) 

Here's a fairly trivial example of how averages can mislead:  Imagine a firm with the vast majority of its lawyers in New York, or New York and London.  Now compare that firm's PPEP to another firm with relatively few lawyers in those high-margin markets.  Surprise!   Same would happen with Revenue per Lawyer, and, on the unflattering side (unflattering to the capital markets-centric firm, that is), with cost per lawyer.  The headline news would be if the capital markets firm had lower PPEP.

When stated baldly this way, none of us is the least surprised that "averages" across firms with completely different business models, strategies, and geographic footprints mislead at least as much as they reveal.  To abstract from our industry, what does the average fuel economy of Toyota's models tell you compared to the average fuel economy of Ferraris?  To say that Toyotas have "better" fuel economy is to focus on facts at the expense of the truth. (Focusing on facts at the expense of the truth is at the heart of many a cross-examination technique.)

Not to go metaphysical on you, but to do justice to the concept of what metrics are appropriate for measuring law firm performance, we need to delve for a moment into the difference between facts and truth.

Facts are convenient, tough, hard, unyielding little pebbles.  Not just facts like water freezes at 32°F or Oxygen is the 8th element in the periodic table, but facts like "during your deposition you said you'd seen this email and now you say you can't remember?"  Or, facts like today's announcement that "Clifford Chance boosted its average PPEP by 25% in the past fiscal year."  It's very hard to argue that facts don't stand for irreducible little nuggets of reality.  But facts can also tempt us into sloppy, lazy, and unreflective "analysis."   Such as:  "If CC boosted its PPEP by 25% and Linklaters and A&O didn't do as well, then that's bad news for Links and A&O."  Well, not so fast.

The difference between facts and truth brings to mind Oscar Wilde's famous definition of a cynic as someone who "knows the price of everything and the value of nothing."  As an economist, I'd be the last to tell you that price doesn't contain a lot of information.  But at times, as with the recent housing bubble, or the tech stock bubble of ca. 2000, prices can't really be trusted.  What you really need to know is what's the value of the asset?

And thus with law firm performance metrics. 

Before you conclude that any particular firm is doing well, doing poorly, or hanging out in the middle of the pack, you first need to figure out what that law firm is setting out to do.  What is their strategy?  Is it to be a "category killer" in employment law like Littler Mendelson or Jackson Lewis?  Then a high PPEP is probably not something they're striving for and it's unfair (and worse, irrelevant, and sloppy thinking, as noted above) to pretend that metric has much of anything to do with them.

Then what am I suggesting?

Not just that there is no "one size fits all" metric, which should be obvious if you're a student of almost any industry (autos, apparel retailing, wine and beer, cellphones), but that to gauge how any law firm is doing you first have to do the hard work of analyzing what they are trying to do.

Are they trying to be a global, but non-headquarters dependent, powerhouse?  Then you might want to know what percentage of their revenue comes from matters using substantial amounts of lawyers' time from multiple offices; or what percentage of revenue is "earned" by offices other than the originating one.  A little tougher to figure out than the Big Hard Rock of PPEP, isn't it?

Sorry to break this to you.

Last month we made an online survey available on the topic of timekeeping practices sponsored by Adam Smith, Esq., and Smart WebParts.  The survey was also publicized through other venues, and ran for three weeks from mid-May through early June.  155 of 211 respondents (73%) completed the survey, which professional researchers deem a "robust" completion rate.  Of the respondents, 86 were partners, 72 were associates, and 51 were senior staff at firms with titles such as CFO, CIO, Executive Director, Head of IT, Head of KM, and many Director-level positions.

Besides looking at the aggregated results, we also analyzed subsets of (a) all partners; and (b) partners with an hourly billing rate in excess of $500.

The results were not only fascinating, but a eye-opening in terms of the amount of "leakage" as well as sheer overhead involved in tracking time.

Here are some more details on the results.  Please feel free to contact us if you'd like more information.

• The average "leakage," that is, lawyers and other timekeepers failing to report all billable time, ranges from $20,000 to nearly $40,000 annually, per individual.
  
  
• The "overhead" costs of keeping time are very heavy, with a mean 3.1 hours/month per individual devoted to filling out timesheets. The mean billing rate of respondents was $438/hour, indicating an imputed cost of $16,294 per person per year.
  • Clearly, significant efficiencies could be gained if streamlined time entry systems were available.
    
    
• Surprisingly (not!), lawyers hate timekeeping--"the bane of my existence" and "the worst part of law firm life" were representative comments.
  
  
• Given these premises, and lawyers' recognition of the need for accurate timekeeping, they would be eager to explore alternatives that invite greater accuracy and, most importantly, would be easier to use.
  
  
• Even if you think AFAs (alternative fee arrangements) are the wave of the future, the need for accurate timekeeping doesn't disappear. Indeed, the more critical and complex it becomes to be able to project profitability of a matter under AFAs, the more important accurate and "real time" hours tracking becomes.
  • The billable hour is, at root, a "cost-plus" system, meaning that any amount billed (and collected) embeds a built-in profit. AFAs, by contrast, carry no such guarantee; that's why knowing the firm's costs, in as close to real-time as possible, is even more important under the AFA model.
    
    
• A chronic source of mistrust between clients and law firms is skepticism (openly expressed by clients and tacitly acknowledged by lawyers) about the accuracy of timekeeping. Any tool that served to convincingly increase the accuracy of this very fundamental metric could only be welcome as a step towards closing that gap and reducing challenges to firms' bills based on posited inaccuracy.
  

For those of you, like us, who care about survey methodology and data integrity, here's some additional information and more detailed findings.

• By number of lawyers, responding firms ranged from fewer than 100 to more than 1,000. The mean number of lawyers at respondents' firms was 494, or approximately equivalent to #82 in the AmLaw 100.
  
  
• Hourly billing rates for respondents ranged from less than $250/hour to more than $750. The mean hourly billing rate among respondents willing to report their rates was $438.
  
  
• Not surprisingly, the plurality of respondents reported being in Litigation/Dispute Resolution (64 respondents). Other practice areas included Corporate/Transactional (53), Intellectual Property (21), M&A (9), Real Estate (12), Tax (7) and General (37).
  
  
• Among all respondents, 60% reported "reconstructive" timekeeping practice. That is, they entered their time at the end of the day or days later by looking at emails, phone logs and appointments. 38% reported that they enter their time contemporaneously as it happens. Less the 2% reported that they worked with their assistant to prepare time records.
  
  
• A majority (54%) reported preparing their timesheets daily. A third (34%) of respondents reported preparing timesheets twice a week or weekly. The remainder (21%) reported doing so twice a month or monthly.
  
  • When looking at the subset of all partners, responses were similar to the total respondent base.
  • Partners with hourly billing rates in excess of $501 evinced less prompt preparation of timesheets: 45% doing so daily, 40% twice a week or weekly and 12% twice a month or monthly.
    
    
• One-third of respondents reported that their firms request timesheets daily. 44% do so twice a week or weekly. 22% expect timesheets monthly or twice a month.
  
  
• The mean time to prepare timesheets each month among all respondents was 3.1 hours, though this ranged from 0 - 2 hours (40%), 3 - 6 hours (39%), 5+ hours (37%).
  • These percentages largely held for all partner responders.
  • For those partners with billing rates in excess of $501/hour, there were variations from the total respondent base and total partners: 0 - 2 hours 25%, 3 - 5 hours 50%, and 5+ hours 25%.
    
    
• Nearly half (47%) of all respondents reported that their timesheets are "accurate over time - it all evens out." 18% reported that ther timesheets are "somewhat accurate - I guess a little [inaccurate]." 2% reported that their timesheets are "not very accurate - I guess a lot [inaccurate]." A third reported their time sheets are "100% accurate by day." (One has to wonder whether the reported degree of accuracy might be greater than reality.)
  
  
• When asked how much time they leaked (that is, time they failed to report) in a week, the mean response for all respondents was 85 minutes, or 1.4 hours. Total responses ranged from 0 hours to 5+ hours. 6% reported that they were "unsure."
  • Projected annually this could total between 50 - 70 hours, depending on the number of days worked in a year. (As with the questions about accuracy, it's more likely than not that leakage is underreported.)
  • With a reported mean hourly rate of $438 among all respondents, annual leakage could conservatively cost a firm between $21,900 to $30,660 per individual.
  • Results from both the "all partners" subset and the subset of partners with billing rates in excess of $500 were generally similar to all respondents. For this latter group, annual leakage could conservatively total between $25,000 to $35,000 per individual.

We hope you find these results interesting; we certainly did, and we are happy to share them in that spirit.

If you haven't done such a study at your firm--or haven't done it recently--we suspect it could be equally eye-opening to get a rough estimate of the combined costs of (a) leakage; and (b) imputed overhead absorbed by timekeeping, across all timekeepers in your organization.  Remember that samples are fine; you don't need an exhaustive canvassing when you're just trying to come up with an order-of-magnitude number.  

If these expenses are sizable, and we'd be surprised if they're not, you might want to see what measures you could take to cut them down.  It may seem mundane stuff, but the revenue from additional time properly captured falls straight to the bottom-line:  And nobody has to work harder to get there.

Again, if you'd like to follow up or have questions, please contact us.

Journalistic wisdom, or maybe it's just engaging newsroom lore passed down, has it that one anecdote is a story but three anecdotes constitute a trend.

If so, Dear Reader, we have a trend:

Mayer Brown has been in secret merger talks with Simmons & Simmons as the Chicago-headquartered firm looks at ways of bolstering its dwindling presence on the UK side of the Atlantic.

It is understood that the two firms held talks, which have now been aborted, over the possibility of creating a £1bn global business that would have gifted Mayer Brown more UK and European coverage and extended Simmons' reach in Asia.

From The Lawyer, June 7.

This of course on the heels of

• The formal closing of the Hogan Lovells merger
• The announcement of the Sonnenschein/Dentons deal, and
• The putative deal between Proskauer and SJ Berwin

Of what precisely does this "trend" consist?

First of all, what it resolutely does not consist of: It does not presage the epic future merger wave, long predicted and perhaps never to be consummated, of the Magic Circle with New York's white shoe or bulge bracket firms. (Not to be oblique about it: This does not foretell Freshfields/Sullivan & Cromwell or Allen & Overy/Simpson Thacher.)

But it does tell a story that's beginning to be compelling: The Silver Circle, or the chasing pack, or UK firms ##10 through 30 or so are attractive merger candidate for US firms outside the New York gilded elite-and vice versa. Why?

Logistical/practical reasons and strategic/global reasons.

The logistical/practical reasons are that people have figured out that you don't have to do a real, complete merger. You can steal a page from the DLA playbook (or, now, the Hogan Lovells and announced Sonnenschein/Dentons book) and not really combine your financial books across the US and UK practices. This accomplishes several neat tricks at once:

• You don't have to integrate cash (US) and accrual (UK) accounting systems;
• You don't have to really integrate currencies, and you can hope that partner compensation and other material currency-dependent metrics simply even out over time-one side of the pond wins some years and the other side wins other years;
• You don't have to synchronize calendar-year (US, generally) fiscal years with March 31st (UK, generally) fiscal years; and
• You can manage the whole kit and caboodle through a "Swiss verein" type holding structure.

Never underestimate the power of the simple do-ability of a deal to affect lawyers' willingness to pursue it.

Strategic/global reasons:

• Whatever the relative cyclical and secular ups and downs of London and New York, it will remain the case as far as the eye can see that London will be the financial capital of Europe and reference point for the Mideast and New York will remain financial capital of North and even South America, and both will remain reference points for Asia and BRIC.
• On the order of 12 of the top 20 major metropolitan area legal markets in the world are US cities; if you pretend to be a global law firm without covering at least some of those markets, you are, if not kidding yourself, surely missing out on some major revenue streams.
• The UK firms traditionally have stronger Asian networks than US firms could ever have hopes of aspiring to. If you share the Asia-centric perspective that only Asia and the US really "matter," globally, as economies, you need to be in Asia. Strongly, on the ground, with history.
• What about the EU, you're asking? Sickly as it is at the moment, with the existential fate of the euro still in the balance, it remains a huge economic engine and it's not going anywhere. Here again the UK firms have traditionally cultivated much stronger networks from Paris and Madrid to Warsaw and Moscow, and these are extremely valuable assets which are extremely costly to build from scratch. The history of "greenfield" office developments has not, by and large, been pretty.

Now, are any of these strategic and logistical reasons actually new? No, of course not. The Swiss verein structure, for example, has been around in accounting firm land for decades. And it's hardly news that UK firms have historically stronger roots across the EU and Asia than US arrivistes, nor that UK firms are nowhere to be seen in America outside a few highly challenging outposts on the island of Manhattan.

What's new is that people are suddenly realizing how all these ingredients might fit together.

And they do fit. The upshot being that many people think the starter's pistol may have fired.

Now, the risk is two-fold. We have the Scylla of firms, on both sides of the pond, that ought by all rights to seize this opportunity for a beneficial combination, but who won't, courtesy of inertia or cowardice or simple inattention. And we have the Charybdis of firms that will think they see a window about to slam shut and will make ill-conceived deals which they will seal in haste and repent at leisure, resulting in mangled fingers at best and limb amputations at worst.

Of course, you and your firm are too smart to fall into either camp.

So what's on everyone's mind here?

Actually, the same things that are on everyone's minds in the US, although the Brits express it in their own unmistakable and uniquely articulate ways.

Here are the key topics:

• The Hogan/Lovells, Sonnenschein/Dentons, and putative Proskauer/SJ Berwin mergers are still viewed-I generalize here-as anecdotes and not as the start of a trend. People see them as one-off's, each done for sui generis reasons unique to the goals of the firms involved in each transaction, and not as kicking off a US/UK combination rush.
  • Although this sounds entirely plausible on its face, I wonder.
  • Why do I wonder?  Consider the landscape facing the "Silver Circle," or, perhaps a bit more broadly, UK firms #6-20 or so.  The Magic Circle, if anything, have put more "clear blue water"  than ever between themselves and the chasing pack during the Great Reset?  This makes moving up-market beyond implausible and into the realm of the quixotic, at least within the timeframe of a typical managing partner's tenure.  Yet remaining mid-market and largely within the UK--granted, many have meaningful foreign networks but they can't make a strong claim to being "global"--seems increasingly a recipe for stagnation if not irrelevance.  On the other hand, US firms tend to have powerful domestic-US networks but, by and large, lack critical mass in London and lack a mature EU network.  Perhaps adding the two together is beginning to make more sense, despite the eurozone's current conniptions.
    
    
• Legal process outsourcing is here to stay. Opinions vary on whether it will occur quickly or slowly, whether it will be done internally by firms creating their own lower-cost-center operations or primarily by new players, and whether it will occur primarily in emerging economies such as India, Malaysia, and the Phillipines, or whether it will occur in places like the US Midwest, the north of England, and Eastern Europe.
  
  
• Firms everywhere are radically taking costs out of their structures. This can include personnel (read: RIF's or "redundancy consultations"), slimming locations, rationalizing other sorts of operations including staff and administrative overhead, and even taking closer account of office expenses such as copying, catering, and so forth. Can you say "purchasing agents?"
  
  
• Pricing pressure is everywhere. Depending on the firm, the sector, industry, the practice area, and the client base, prices are off anywhere from 0% to 25%. Some firms are engaging in what I call idiotic pricing, training their clients to enjoy steep discounts. This will not stand. It will not stand for the firms that engage in it, that is; clients are only too happy to oblige our islands and pockets of insanity. And firms that do this are training clients in the worst sort of possible behavior.
  
  
• Finally, and most importantly, everyone is re-examining their fundamental assumptions and strategies.
  • Firms who used to be able to straddle two or more different markets or business models can no longer do so and must now choose.
  • Firms with different--materially different--levels of professional talent within their ranks must now choose.
  • Firms with alternative pricing models for their various services don't necessarily have to choose, but they have to clearly and conspicuously articulate to their clients why one model suits one market and the other the other.
    

Bottom line?

The "Great Reset" has thrown down the gauntlet. Firms that were "sleepy" (a phrase I suddenly hear often, in different contexts) are wide awake and even startled. Our familiar world is going to look markedly different in five to ten years.

And it won't necessarily be populated only by law firms. We face enduring competition from legal process outsourcing frims and perhaps, although who they might be have yet to be identified, other nontraditional providers altogether.

In the meantime, the watchword is: Agility.

Whatever your views might be on the intrinsic validity or durability of the billable hour, timekeeping is still fundamental to most firms' accounting and compensation systems, so it remains a topic of "evergreen" interest.

Adam Smith, Esq. has posted a short survey--it will take a few minutes at most, if you dawdle--on timekeeping practices, which you can take here. To encourage you to do so, we will distribute the aggregated, anonymized results to all participants.

Orrick announced on May 12 that "it will no longer use or report, internally or publicly, the metric of Profit Per Equity Partner."

Please join me in prayer, dear congregants, that this will inaugurate a trend.

I'll explain in a moment, but first, Orrick deserves the floor (from their press release):

The firm believes the fundamental changes taking place in both the business of law and in the relationship between law firms and its clients have made the metric no longer constructive or informative for the firm or the industry.

"The legal profession is at a transformative moment, and now is the time to reconsider all of the metrics we have traditionally used to measure success," said Ralph Baxter, Orrick's Chairman and CEO. "Our partnership is engaging in a serious dialogue to identify more appropriate metrics to evaluate our firm, to strengthen our client relationships, and to make our lawyers' careers even more meaningful. Moving away from the Profit Per Equity Partner metric is a step toward greater accuracy and transparency about law firm economics, and it will focus us even more on how we deliver value and efficiency to our clients."

(Disclosure: Ralph and I have discussed alternative metrics for law firms in general, but I did not have any hand in Orrick's decision.)

Now, let me specify what I'm not going to talk about: Nothing logistical or prudential about this decision. I'm not interested in whether The American Lawyer can reverse-engineer the Orrick PPEP calculation (with or without willing sources); I'm not interested in whether competitors or even Orrick partners might conceivably wonder if the firm had something to hide; and I'm not interested in whether his will help, hinder, or be immaterial to Orrick's prospects in the lateral market. All those things I leave for others to speculate upon. So to the game.

Why do I "pray" (I exaggerate, but only to underline my belief in Orrick's move) that this become a trend? Let me count the ways:

• We all know, wink-wink, that PPEP is a consummately manipulable number. Even The American Lawyer has never mounted a resounding rebuttal to this widespread assumption. If it's a metric that can be gamed, how much weight does it deserve?
  
  
• PPEP is an average. As Cesar Alvarez of Greenberg Traurig famously said, the only PPEP that matters is "profits per me." I'm not being facetious. There are firms with (for example) a reported PPEP of $1.2-million and a band of equity partners' actual incomes from $500,000 to over $5-million. It's like the old joke about "Bill Gates walks into a bar...." (and the average net worth of those in the bar becomes $5-billion).
  
  
• Of far greater weight is the indictment of PPEP on the merits. Unfortunately, in the 30 or so years since it came to prominence under the fabulously talented Steve Brill, it has come to encapsulate Everything You Need to Know about a law firm. That of course is unadulterated pap, but we find ourselves drawn to it with an almost voyeuristic pull, much as we'd be drawn to salacious, compromising pictures of prominent politicians or Hollywood celebrities.
  
  
• And with the same effect: It tends to override the reasoning faculties of our frontal lobes.
  
  
• So what, if I'm proposing to dethrone PPEP, matters more in terms of evaluating a law firm's performance? Here are just a few candidates:
  
  
  • On the quantitative side:
    • Revenue Per Lawyer
    • Compound annual growth rate (CAGR) of revenue over a multi-year period
    • Realization rates (implying, I would argue, clients' perception of value-for-services-received)
    • Associate retention rates (or attrition rates, measured negatively)
    • Percentage of business from clients of long-standing duration (say, more than 3 or 5 years)
    • Percentage of all legal spend from top 10 (20/50/100) clients
      
      
  • On the qualitative side:
    • Client satisfaction
    • Lawyer morale
    • Commitment to and investment in professional development
    • Commitment to and investment in such things as diversity and pro bono
    • The quality of firms the firm takes lateral talent from and the quality of firms they lose lateral talent to
    • The quality of firms the firm wins assignments from and the quality of firms they lose assignments to
    • Quality and morale of professional and support staff.

And I could go on, but you get the point: PPEP is a remarkably crabbed, narrow, and, at this point, antiquated measure of law firm excellence. "Antiquated," in particular, because we've all learned long ago how to game it. It doesn't mean what it used to mean, at least if meaning consists in reliable comparability across firms.

You, there in the back, standing up and waving your hand?

Yes, I know, there's a case to be made that it's only fair that PPEP be "a part of the mix" of evaluating a firm, and that it tells the market something important about how a firm is able to distill the ineffably convoluted blend of clients, talent, markets, global platform, and infrastructure into a magic output.

I'm here to tell you the pendulum long ago swung preposterously far in your direction. And that we're long overdue for a big correction.

Far be it from me to aver that profits don't matter; they matter tremendously.  Baxter feels the same way, judging from his talk with Above The Law:

We're not saying that it doesn't matter to be profitable, it does. We're not saying that it's not important that our most senior partners are compensated in a way the matches the great law firms in the world. And they will be.

Whatever possessed us to rely on this shockingly narrow and unitary metric for so many years, I believe its time has passed. It served a salutary purpose in the beginning. That purpose was (a) transparency where opacity previously reigned; (b) objective comparability where impressions and reputations previously reigned; and (c) shining a light on quality of management where kitchen-table and seat-of-the-pants amateurs had always prevailed. That time is long past.

A final observation: Do you know what your clients' GC's make? (Unless they're public companies and the GC is one of the top five highest-remunerated officers, the answer is almost assuredly not.) Their AGC's, deputy GC's, or business head units?

Then why should they know that (roughly, that is) about you?

This may be the key point.

Clients hate PPEP. All it can possibly accomplish is to inspire envy. "I work just as hard or harder as XYZ, and s/he makes $#.#-million!"

Is this a terribly smart thing for us to be doing to ourselves?

Let us close by joining in prayer....

"Indian law group names City leaders in call for action against foreign firms" read the headline in LegalWeek a few days ago. The (brief) article goes on to explain that a group called the Association of Indian Lawyers filed a petition for a writ compelling the Indian Government to act against foreign lawyers in the Madras High Court naming, among others, Allen & Overy, Clifford Chance, Shearman & Sterling, White & Case, and the legal outsourcing firm Integreon.

Somewhat colorfully, it accuses the firms as follows:

"The issue is no longer about the entry of foreign law firms, it is also about the manner in which these foreign law firms continue to do business in India despite a ban on them. These firms have already entered India indirectly and are operating out of five-star hotels and business centres."

Perhaps three-star hotels would be less objectionable?

This follows the news that Ashurst, Chadbourne & Parke, and White & Case all agreed to close their offices last February after the Bombay High Court "ruled against the practice of law by foreign firms in India."

Despite the ever-sunny ABA Journal's attempt to put a positive gloss on it ("Still Open for Business"), quoting a Baker & McKenzie senior counsel as saying that "it's nothing to get excited about," the question remains:  What are they thinking?

To paraphrase the late William F. Buckley, Jr., you can stand athwart the tide of history and yell, "Stop," but it's a feckless endeavor. The inexorable trend of the past century and more has been towards:

• More powerful globalization;
• More open national borders (in terms of trade in goods, in services, and vis-a-vis people and ideas);
• And accelerated "creative destruction" as competition, in its ruthless but fabulous way, ensures that only the fittest survive.

Consider the US car industry, notorious basket case whose problems were of course first exposed by the invasion of the Japanese in the 1970's. Detroit had been selling essentially--with or without tailfins--the same cars for two decades, from the early 1950's through the early 1970's. Can you name a significant innovation during all those years? No airbags, no disc brakes, no 4-wheel independent suspension, no improved fuel economy, no advances in automatic transmissions or even sound or heating/airconditioning systems. Nothing.

But consider the cars of today vs. those of the 1950's. Here's a fascinating comparison that shows what happens when a 2009 Chevy Malibu has a head-on collision with a 1959 Chevy Bel Air (thanks, NHTSA).  

The moral is simply that competition causes everyone to raise their game. Raise your game or, as the schoolyard (or NFL) taunt would have it, "Go home."

The Indian lawyers challenging US and UK firms are decisively and apparently blindly on the wrong side of history.  They appear frightened at the prospect of having to "raise their game" and, as industries in denial are wont to do, would prefer salvation-by-government to the vicissitudes of an open market--vicissitudes which we know, from the teachings of everyone from Joseph Schumpeter ("creative destruction") to Clayton Christiansen (The Innovator's Dilemma), lead rapidly to tremendous improvements in products and services.

Perhaps the only explanation for this obtuseness was the one provided nearly a century ago by Upton Sinclair:

"It is difficult to get a man to understand something when his salary depends upon his not understanding it."

We shall see how long the Indian barriers last.

As has been widely reported on law.com and Bloomberg, Dewey raised $125-million in a private placement of bonds, reportedly sold to institutinal investors (mostly insurance companies) with maturities of 3--10 years. Rates paid were not disclosed. The firm was close-mouthed about the transaction:

A source at the firm says Dewey was refinancing existing bank debt. "With [our] bankers we looked at the rates and thought this was a good time to lock in," says one partner. "Essentially we think the current rates are the lowest we're going to see." The partner adds that bonds were investment grade, carried three- to 10-year terms, and, he adds with some pride, oversubscribed. "We suspect that other firms will pursue this route," he says.

Richard Shutran, a partner involved in the decision-making process, was not immediately available for comment.

While this is, strictly speaking, not the first private placement of debt for a law firm, it is among the fingers-of-one-hand of such transactions. Writers were clearly struggling to make it look less noteworthy than I believe it is:

Dewey is certainly not the only firm to use a bond offering to refinance debt. Dewey Ballantine, one of its predecessor firms, issued a private placement in 1990, and MoFo did the same in 2001 and 2002 to refinance debt incurred when the firm spent money on office renovations and expansion, Bloomberg reports. Clifford Chance issued $150 million in bonds in 2003 to fund its expansion [into new offices in Canary Wharf--Bruce].

That's about it, folks; and the Clifford Chance deal was the only one I'd deem a real precedent.

What are the trends in law firm lending in general?

"If law firms were rated, they would typically be investment grade," [Jeffrey Grossman of Wells Fargo's law firm group] said.

Citigroup has focused on law firm banking for more than 35 years, according to Dan DiPietro, chairman of Citi Private Bank's law firm group. JPMorgan and Wachovia, now a unit of Wells Fargo, established dedicated law firm groups in the past six years with hires from Citigroup.

More law firms tapped their lines of credit or set up new ones during the credit crisis, said DiPietro. Loans to law firms from Citigroup increased 30 percent in 2008 and another 10 percent in 2009, he said. The bank has about $5 billion of loans outstanding to law firms, he said.

While firms are tapping bank lenders for more capital, they're also tapping their partners--and at least in the cases of DLA Piper and Reed Smith, non-equity partners--for additional capital contributions. Strengthening your balance sheet in a time of financial stress is, generally speaking, sound practice and I applaud it. But the questions posed by the Dewey deal outnumber the answers. Such as?

I must assume that some form of private placement memorandum was prepared in connection with Dewey's offering. What a fascinating and juicy document that must be, but here are the areas that would grab my attention first and foremost:

• Risk Factors: How would Dewey describe the risks to a world-class law firm? Client flight? Partner flight? Upstart competition? Outsourcers such as Axiom Legal or CPA Global? Losing the war for talent? The chances of New York ceasing to be a global financial capital?
  
  
• Representations and warranties: What undertakings has Dewey assumed with respect to revenue, or even revenue growth? Size of the partnership? Client attrition? Secondary financing?
  
  
• Finally and perhaps of greatest fascination, what are the remedies of debt-holders in the event of material breach of covenants? Is there personal recourse liability to the partners? (I have to surmise not.) The ability to accelerate and demand immediate repayment in full? A lien against tangible assets?

Perhaps the larger question, given the imminent effectiveness of the LSA in the UK, is whether the outside investors' interest in Dewey is debt or equity? Clearly it's formally characterized as debt, but we all know interests are routinely re-characterized for tax reasons as well as interests of justice. Two indicia that this is more like equity and less like debt are (my surmise that) there's no recourse liability and the all but certain absence of any meaningful collateral securing the debt--law firms have no meaningful material assets.

But I'm still fascinated, perplexed, and enthralled by what the debtholders' remedies might be in case of a material breach or default: To seize operational control of the firm? (Elevating the debt, of course, to equity.) This seems implausible in the extreme, but what short of that would constitute a serious remedy?

Or perhaps the remedy is not really defined, on the assumption of improbability. That in and of itself would be interesting to know.

 

Last week I had a chance to sit down with Howard Altarescu of Orrick, who I felt compelled to get to know better when he was the first, and still the only, person to know the answer to a question I like to pose, whenever I have the chance, to groups of lawyers discussing business issues facing law firms. First the question, and then my conversation with Howard. (The answer to the question is at the end of this column, but jumping ahead, as P.D. James or Sir Arthur Conan Doyle would attest, is cheating.)

Q.: What is the one line item that appears on virtually every corporation's balance sheet but not a single law firm's?

Actually, that introduction was not remotely fair to Howard, although it was intended to engage you, Dear Reader, in thinking about the answer to the question as you read on. The fact is that I'd heard about Howard for quite some time and when I found myself in the same room with him, the opportunity to connect was not to be denied.

Howard's background is distinguished, to say the least:

• Boston University BA and BS
• Boston University School of Law JD and Articles Editor, Boston University Law Review
• Partner at Cadwalader
• More than 20 years at Goldman Sachs
• And now a partner at Orrick, since June of 2008 (think about that timing for a moment-after Bear Stearns' collapse but before Lehman's). 

Howard is today working with a number of financial institution clients run by former Goldman colleagues (and others) and is also representing the FDIC on its proposed new securitization program.

Howard also considers himself a confirmed capitalist and a Liberal Democrat, which is a combination I find scarce and therefore (Econ 101) valuable. Part of that relatively unusual combination of traits may come from Howard's background, where he was the second college graduate in his family and the first to go to law school. His father owned a small TV shop in the Bronx, and Howard grew up in New York and, save for his BU days, has always been based here.

And, since you asked, none of his three children is going or will go to law school, and that appears to be more than fine with Howard.

But back to Howard: He joined Cadwalader right out of law school and had the good fortune to become a protege of Tom Russo (now GC of AIG after a brief stint at Patton Boggs and 15 years as chief legal officer at Lehman Brothers). Early on at Cadwalader, Howard worked on the seminal KKR deal of Houdaille Industries. KKR was so little known in the market at the time that the team had to conduct due diligence on who, exactly, these guys were.

Howard also got the chance to work on the first Freddie Mac structured mortgage pass-through offering in 1975. When I say "first," I mean first. Howard related how he was told to sit down with a clean legal pad because there were literally no precedents for this type of deal structure. He walked the halls at Cadwalader, going from partner to partner, asking them for their input in each separate piece of the deal.

This led to other first-of-its-kind deals, including representing Freddie Mac on its first CMO issuance (in 1983) and Goldman Sachs on its first mortgage-backed bond issuance (1984, in case you were wondering).

Shortly thereafter, Goldman decided to get into the mortgage business in a serious way and hired Howard away from Cadwalader. He would be there for over 20 years.

Howard was head of the mortgage finance department, and soon became involved in Mexico advising the government on the creation of a secondary mortgage market. This led to a fine run until the 1994 peso crisis, which needless to say blew it all away. But in the process, Howard had been "bitten by the emerging markets bug." He reported that the following six years (1994-2000) involved his commuting to South America and leaving notes for his children such as "Tuesday: To Mexico. Wednesday: Argentina. Thursday: Home for dinner." Stress on the system aside, this seemed to work until Mexico defaulted, Russia defaulted, and Argentina defaulted. Howard reports his reaction at that point: "No mas!"

What next? John Thain, then President of Goldman (2001) suggested Howard go to the equities division, but, Howard reports ruefully, he declined. Rueful? Yes, because Howard returned to the mortgage department (COO of Principal Finance, Head of Mortgage Finance and other roles) and then the mortgage market simply died. Whereupon Howard decided it was time to do something else.

While Howard was in discussions with a number of former Goldman colleagues and others, a long-lost friend from 20 years earlier at Cadwalader, Mark Levie, called Howard from Orrick and one thing led to another.

Why Orrick?

"I hadn't, honestly, followed the firm and I was not looking to go back into the practice of law; but the more I got to know about Orrick and the more people I met, the more I felt that this was something different and quite interesting. The attitude was innovative, commercial, and entrepreneurial.  There was also a focus on teamwork and culture that very much reminded me of Goldman Sachs.  Partners on the transaction side like Cam Cowan in DC, Michelle Taylor in Hong Kong, and Jim Croke and Ron D'Aversa in New York, as well as litigators like Mike Delikat, Josh Rosenkranz and Michael Hefter, really know their clients, take a proactive approach, post other partners on developments, and treat their practice as a business."

So what does Howard actually do today?

"I have a broad strategic, advisory and business development role. A typical day involves lots of calls and meetings, with clients focused on business development opportunities as well as with other partners on a variety of transactions and other matters. Like at Goldman, I believe there is great value to the firm in teamwork, being inclusive and open, posting broadly, giving others the opportunity to provide input as well as for all to benefit from whatever may be learned in particular situations."

And when is the mortgage securitization market coming back?

Now.

He reported that they're working on deals, some of which are private placements that don't rely on ratings agency imprimaturs. In the short term, he believes, there won't be a large volume of deals because of the difficulties in getting a rating agency blessing; but in the meantime, smaller deals can be done with sophisticated investors without ratings, and some public deals are also possible.

I tell Howard that I don't believe ratings agencies will ever again have a scintilla of credibility, and I ask him how will we ever again have large-scale deals in that case?

He proposes a future in which consortiums of investment banks or other institutional investors could sponsor mutual ratings.

As a securities lawyer, I can't resist asking him about what the disclosure documents for these hypothetical new securitized issues would look like. First, he penetrates to the heart of the issue of disclosure documents with this memorable observation:

"Disclosure documents have always been written for litigators after the fact."

Going forward, Howard says we need to get back to the founding purposes of the securities laws:  "Full, fair, and accurate disclosure to investors must be the primary purpose."

He believes that the key provisions in deal documents will involve the loan repurchase enforcement mechanism when there are rep/warranty breaches..  In exigent circumstances, who gets what voting rights and when? Recalling, perhaps, the early days of his career when no templates existed and there was little if any prior art: "Nothing is carved in stone."

Meeting adjourned.

So what, if anything, can we learn from Howard's experience?

You may be concluding, "Not much," because you've decided it was a different era. And indeed it was, in many ways. Howard reported that when he was a first-year associate at Cadwalader (nine months in, to be precise), Tom Russo was leaving to join the then-newly formed CFTC and Howard was told that he would be taking over Tom's key client relationships in the broker-dealer sector because "you know these people better than anyone else in the firm."

Could that happen today? You be the judge.

But something more timeless and essential struck me about Howard's career: He was at the crossroads of innovation.

A couple of weeks ago I participated in a conference at Georgetown Law (which I had helped organize), during which Prof Peter Sherer of the University of Calgary presented a paper  about the history of leading law firms during the Great Depression. His conclusion?

The firms that survived, and thrived for another 80 years and potentially more, were those that had a "critical mass of flexible young partners" and that were able to remake their firm competencies and expertise and, accordingly, benefit from a flight to quality by clients.

How does this relate to Howard's career?

• Agility
• Being at the forefront of what's new
• Thinking young

Take a lesson.

---

And oh yes, the answer to the question posed at the top of the show?

Retained earnings.

The life of the law has not been logic; it has been experience.

Oliver Wendell Holmes, Jr., The Common Law at p. 1 (1881)

Of all the pithy and enduring observations that have been made about our profession (and, yes, our industry), this may be my all-time favorite.  It is, if nothing else, King of the Hill until something else comes along that I find more insightful and of broader applicability.

What brings this text for the day to mind is an article in today's WSJ, "Conflicts Force Big Law Firms to Lose Clients." The thrust is straightforward, and well-trod ground to anyone with a scintilla of sophistication about our industry:

Big blue-chip law firms are losing potentially lucrative assignments to smaller firms even as the industry sees a spike in lawsuits against banks stemming from the financial crisis.

The reason for the change: ethics rules that govern conflicts of interest for lawyers and their firms.

Law firms usually can't sue or investigate banks that they have represented, unless the clients take the unusual step of waiving the conflict. Thus, many small to midsize firms, which count fewer banks as defense clients, are filling a growing demand for conflict-free lawyers able to file lawsuits against banks.

The article goes on to recount a few tales of partners at name-brand firms (Shearman & Sterling, notably) decamping to smaller firms (Houston-based McKool Smith, New York's MoloLamken LLP) in order to be able to pursue claims against large banks and other financial institutions in today's target-rich environment.   This phenomenon, of course, has been widely reported, as has the allied phenomenon of BigLaw partners moving to smaller, boutique, or regional firms in order to be able to offer their clients more modest rates.  I have no doubt whatsoever that both are genuine trends--exacerbated by the Great Reset and unprecedented client pressure on rates--but I would also counsel you not to take every single such reported story 100% at face value. 'Nuff said.

The conflicts issue, however, ranks so large in the context of pursuing claims against financial institutions that Michael Carlinsky, a partner at Quinn Emanuel, is quoted by the Journal as saying that the freedom to sue financial firms "is one the single biggest ingredients to the success of our firm."   Mr. Carlinsky deserves a commendation for candor, if nothing else.  I always worry about business models predicated on regulatory arbitrage, but I would be the last to gainsay that firm's astonishing ascendance over the past several years.

But this isn't about Quinn Emanuel.  It's about our conflicts rules.

What about them?  I have long believed them to be--and the Journal piece confirms them as:

• Provincial;
• Of an antique era;
• Utterly at odds with the common sense of "expertise markets" at work everywhere else in the economy; and
• Long since overtaken by events.

May I elaborate?

The conflicts rules are of course creatures of the ABA and the state bar associations which, by and large, are creatures of and responsive to solo and very small firms, and which have no interest in, or representation in their ranks by, BigLaw or global firms.  Thus my charge of "provincial."

And "antique" because the notion that you can't represent Client A at one point and Client B, a competitor of A, at another, is simply quaint.

Which brings me to the third and most important economic point, which is that, when the going gets tough, corporations and individuals seek out experts.  And how do you define "expertise"?   Without being technical, I would say it's a function primarily of having great skill or knowledge in a particular area or domain by virtue of having practiced there at a high level for a significant period of time.  In other words--and here's where the conflicts rules proclaim themselves profoundly at odds with economic common sense--experts are most likely to be found at firms that specialize in representing the industry you're interested in.

We saw this, famously, of course, during the height of the financial crisis (say, from the 3rd quarter of 2008 through early 2009) when the indomitable Rog Cohen of Sullivan & Cromwell represented nearly every major player in sight, and not only every player, but often two players at the same time who were nominally on different sides of a single issue or transaction.

Why?

Because, in extremis, we go to experts, and conflicts rules go out the window.  In other words, they have been overtaken by events.

Finally (and this may be the most powerful objection to them), aren't the rules just flat-out irrelevant?

My point is not the technical and persnickety one that clients can always waive conflicts, or law firms can seek waivers-in-advance.  My point is that commercial and business reality is always going to carry infinitely more weight than Model Rules of Professional Responsibility. 

If every Wall Street bank thinks Rog Cohen is their guy, why shouldn't he be?

Conversely--and this has even more force--conflicts have always and everywhere been in the eye of the beholder. And the beholder is invariably the client, not the law firm and not the ABA or the New York State Bar Association.

If you doubt me, I leave you with this now-legendary tale of conflicts drawn from the annals of the advertising industry.  In AdLand, it's long been widely recognized that no agency can represent, say, Coke and Pepsi at the same time.  That may be simple enough, but the legendary tale dates to the days before smoking was banned on airplanes.  An ad agency happened to represent Northwest Airlines and Philip Morris.  Northwest stole a march on the industry (or perhaps simply saw the handwriting on the wall) by being the first major carrier to voluntarily ban smoking on all its flights.  Philip Morris's response?  They fired the ad agency for a "conflict."

Perhaps the life of the advertising industry has not been logic, either.

A few days ago the juxtaposition of two articles, one in The Wall Street Journal and the other in The Times (UK), struck me as too rich not to point out.

The WSJ wrote, in "Gap Widens Between Tech Richest and the Rest," that:

A handful of cash-rich companies are consolidating power in the technology industry, using their wealth to expand into new businesses and making it harder for small and midsize competitors to break through.

In the past two years--in the teeth of the recession (think about it)--Apple, Google, Microsoft, Oracle, and six other large tech companies generated over $68-billion in new cash, compared with $13.5-billion, just 20% as much, for all of the other 65 tech companies in the S&P 500 combined.  The results are clear:

Because of their massive cash accumulation, these companies can afford to take risks that smaller companies can't at a time when the economy remains fragile. The result is a bifurcated tech landscape, says Erik Brynjolfsson, a professor at the Massachusetts Institute of Technology's Sloan School of Management. [...]

The repercussions from the cash discrepancy are being felt throughout the industry. Some midsize tech companies are giving up trying to compete with their larger rivals.

"I'm not going to fight" being a mid-tier company, says Enrique Salem, chief executive of security-software maker Symantec Corp., which has annual revenue of $6.1 billion and cash reserves of $2.6 billion. "It's a losing proposition for me to try to catch up with Oracle."

So what's a smaller or mid-size competitor to do?  Assuming that folding one's tent is not an option, the only answer is to take on more risk.  In plain English, you have to really stick your neck out:

Says Ciena CEO Gary Smith. "A large company can make a mistake in one of these acquisitions and it isn't going to be hugely impactful to them."

Ciena has no such luxury, he says. "Clearly, if we get this wrong, it will not have a good outcome."

Meanwhile, The Times (UK) wrote in "Law firms turn to banks, not partners, for cash," that:

Leading law firms increased borrowing by 40 per cent in response to the financial crisis, despite the sector's traditional aversion to taking on bank debt.

Debts among the 40 biggest legal practices whose accounts are publicly available rose to £591 million in 2008-09, according to data compiled by Grant Thornton, the accounting firm. The previous year the debts were £425 million.

Peter Gamson, head of the professional practices group at Grant Thornton, said that many firms had turned to their banks for funding rather than asking their partners to contribute more capital. The average partner now has £138,000 invested in his or her firm, compared with £128,000 before the crisis hit.

"It certainly looks like a lot of firms are going to a bank to get funding rather than sitting partners down and saying: 'Look, guys, we've got to put some more money in,' " Mr Gamson said.

Now, that may be lovely insofar as it helps partners sleep at night, but the clear message of our friend Mr. Gamson--as well, of course, as that of the entire tech industry as recounted in the WSJ--is that it leaves firms on very tenuous footing indeed.

The lack of working capital left many firms stretched when the downturn began, Mr Gamson said. "As a sector, [legal services] looks very undercapitalised. There's a huge reluctance to ask partners to contribute more capital. The question is how long you can play that game?"

Mr Gamson warned that the low ratio of capital to debt at many mid-tier firms could make it harder for them to grow when the market recovers. In addition it could deter funding from investors when new rules on outside ownership take effect next year. "Any investor is going to look at the business and think: 'Are the owners of this business being realistic about how much they're putting on the line?' " he said.

But we should not be surprised.  After all, the typical law firm (I'm hard-pressed to think of any exceptions, now that I think about it) "strip-mines" the firm of cash at the end of every year to pay partner compensation.  

Here's a parlor game for you next time you're feeling a bit churlish towards a colleague:  Challenge them to identify the balance sheet entry that appears on every corporation's statement but no law firm's.  The answer?  The line for "retained earnings."  I promise you no one guesses right.

Mr. Gamson puts it just about right:  "How long can you play that game?" 

And Ciena's Gary Smith completes the thought:  If you're playing with limited capital and make a mistake, "it will not have a good outcome."

You have been warned.2

Not every day do we get what appears to be good news on the much bruited-about topic of the US's global competitiveness.  But courtesy of today's FT we have just that, in New  York ties with London for finance crown. 

A consultancy with the New Age-y name of Z/Yen, commissioned by the City of London Corporation, prepares a semi-annual "Global Financial Centres Index" and this year's results put the Big Apple and Big Ben in a dead heat at 775 points apiece.  Although the methodology is something of a black box, it " combines a survey of financial professionals with factors such as office rental rates, airport satisfaction and transport."  A total of 75 global centers worldwide are ranked, with Hong Kong and Singapore (3rd and 4th, respectively) making sizable gains on the Atlantic Anglo pair.

New York fared better than London for business environment, availability of people and infrastructure, even though those participating in the survey agreed that New York had taken the bigger hit from the financial crisis.

Meanwhile, London hurt its own cause by raising the top personal income tax rate to 50%, along with a 50% payroll tax on all bonuses over £25,000.  (France and Germany pulled similar stunts; the US, of course, has at least so far not.)  Here are the top 10 cities:

Meanwhile, I was in front of about 100 managing partners, executive directors, and other senior law firm leaders here in New York last month and the sponsor of the event had kindly agreed with my suggestion that we arm attendees with wireless polling devices.

One of the questions I asked was "Five years from now, it will be clear that the greatest growth in demand for corporate/financial legal services is in:"

You can see that New York garnered a handsome 25% of the votes (multiple selections were not allowed).  In order, people voted for:

• China, including Hong Kong:  31%
• New York:  25%
• The rest of Asia, including Japan and India:  22%
• The EU, and Central & South America:  Tied at 8% apiece
• London:  6%
• The rest of the US:  0%

Another way of looking at this is that between them, New York and Asia-writ-large had 78% of total support, while the entire rest of the world had (obviously) only 22%.

If you've been to China lately, you know that as far as the Chinese are concerned, there are only two economies that matter:  Theirs and the US.

There may be life in this little old narrow island yet.

This weekend I received by courier from the UK the just-released report The Next Wave: Globalization After the Crisis, published by Jomati Consultants LLP, the London-based affiliate of Adam Smith, Esq.  If you don't know Jomati, you should:  Based in the City of London, it's headed by Tony Williams, former managing partner of Clifford Chance and then of Andersen Legal.  (You won't be surprised to hear that I count Tony a good friend.)

Earnings Season is now in full throat, and we're beginning to see a remarkably consistent pattern emerge:

• Revenues essentially flat to down 10%
• Profits flat to slightly down-but PPP flat or even up a bit

I generalize, of course.

But here is some of the evidence (these are randomly selected from more recent releases):

	Revenue	Net Profits	RPL	PPP
Arnold & Porter	+2%	+12.3%	-1.1%	+1%
Bracewell & Giuliani	+<1%	-7.7%	+4.2%	+10.2%
Dechert	-12.6%	n/a	n/a	-8.6%
Fulbright & Jaworski	-7.5%	-6%	-6.3%	-5.2%
Holland & Knight	-10%	flat	-1%	+2.6%
Howrey	-16.3%	-28.3%	-19.2%	-34.9%
Kirkland & Ellis	+2%	+16%	-3.6%	+1%
Mayer Brown	-14%	-19%	-7%	-4%
Patton Boggs	-2%	n/a	-7.4%	+3.7%
Paul Hastings	-9.8%	n/a	+4.4%	-1.4%
Vinson & Elkins	-4.8%	+5.5%	-6.2%	-3.1%

I could go on, but you get the idea. And again, I emphasize that these are random names, selected, frankly, from the latest data I could readily put my hands on. I would like to think a random sample implies it might be statistically representative of a larger universe.

So what do we see?

The first column, revenue, ranges from essentially flat (certainly inflation-adjusted flat) to rather seriously down. This is of course the pole star that management must manage to. It's a rigid, unyielding number, particularly in cash-basis accounting businesses, from which there is no escape in terms of everything else you can try to manage on the expense side of the income statement. More on the implications of this in a moment.

"Net profits," the second column, are pretty much all over the place, but I'm not sure how much information that metric contains, so this doesn't particularly alarm or delight me.

When it comes to RPL, however, faithful readers will know that this is one of my favorite all-purpose law firm "performance" measures. Why? First of all, it's hard to fudge either the numerator or the denominator. (Sure, you can play games with FTE's and so forth, but frankly most firms aren't that focused on this metric to go to the bother.) So what's the RPL story?

To the extent it's disclosed, or calculable, I view RPL as something of a rough proxy for "quality of practice." By that I simply mean that the more clients are willing to pay you, on average, for a lawyer-year's worth of time from your firm, the higher the value clients place on what you do for them. At the margins and in the short run, this may be influenced by tweaking hourly rates or recognition percentages, but over the long run and in extremely revealing ways, the trend of your firm's RPL (vis-a-vis your peer group, as always--discipline, people!), be it up or down or sideways, tells an enormously important and almost incontrovertible story about the trajectory of your practice. You can be going up-market, down-market, or staying-market, but RPL, over time, won't lie.

So again, what does RPL reveal? Pretty simply this: It was a tough year. If you eliminate the highest and the lowest changes in RPL, the remaining cross-section looks like it's down in the middle single digit percentages. The sky is not falling, but people clearly aren't as busy, or aren't as busy on valuable matters, as the previous year. But the most important part of that sentence is the introductory clause: We're not in dire straits.

Finally, of course, column #4, the sexiest column of the all. Permit me to suggest that the PPP story is the second simplest story to tell, after the gross revenue story. Again, eliminating the highest and the lowest to normalize against outliers, the story is one of essentially flat year over year PPP.

---

The two key numbers come back to this: Revenue flat to seriously down, PPP flat to very mildly down.

Here's where I think law firm management deserves credit (again, generalizing).

Most of corporate America would be delighted to have emerged from 2009, or any difficult period, with revenue decidedly down but profits marginally up. It takes turning the ship quickly. And here's the good news from our industry: We did just that.

If you look at any of the charts tracking layoffs during 2009 (if you haven't, that's OK, I have so you don't have to), more than half the year's total layoffs took place in the first 3 months of the year. In other words, management reacted quickly.

Remember that September 2008 was the carpet-bombing month of damages to the financial system: Not just the Lehman bankruptcy, but the WaMu takeover, largest in history by the FDIC, the death of investment banks as we know them, the BofA/Merrill takeover, the $85-billion AIG investment, the Fannie Mae/Freddie Mac implosions, and even more-all in a single 19 days.

For firms' management, widely if not across the board, to have responded with historically drastic measures one short quarter later is, to me, nothing short of surprising. Management deserves more credit than it may have gotten.

As an industry, we did respond with alacrity. Kudos where kudos are due.

---

Now, two last thoughts.

First, the human toll of layoffs.

Putting aside partners who were overdue to be "spoken to," non-equity partners who were in place only because of a cowardly preference by their practice group leaders for avoiding awkward conversations, associates who long since "checked out" psychologically and in terms of commitment, and staff who might have come to view their jobs as sinecures--all of whom needed to be excused for the health of the firm overall, and overdue much of it was--there are still the legions of people who were collateral damage. People who were doing their best, even if it wasn't good enough. My heart goes out to them, and I've known more than a few.

But second, the Darwinian logic of the marketplace that compels firms to sustain PPP in the face of the most gruesome downturn in any of our careers is not cavalier and not selfish.

Why is PPP so important?

Because it is nothing less than the lifeblood, in today's currency, of firms' ability to compete for talent in the market. (Whether tomorrow could look different is a story for another day.)

If management allows PPP to take a serious hit in today's hyper-mobile environment, they may find that all of a sudden there are fewer partners and no profits. Lights out. And that, of course, is when the collateral damage to the secretaries with 20 years' service and a learning-disabled child at home hits you between the eyes.

Jack ("Neutron Jack") Welch famously said that his 20/70/10 forced-ranking of stars, the solid bench, and the ankle weights who had to be cut off, was not inhumane. It was the only way to provide a healthy and ever-renewing organizational environment going forward in which the stars and the solid citizens would not be tethered to the subpar and the serving-time.

So looking ahead to 2010, take heart. By and large we did what we had to do at the start of 2009, and the numbers, which overall and in the long run don't lie, are starting to report that story.

The Law Society of England & Wales recently published Nick Jarrett-Kerr's Strategy for Law Firms: After the Legal Services Act, and Nick was kind enough to send me a copy for my perusal. (Disclosure: I've known Nick for years, although we have never formally worked together.)

The contents are wide-ranging, as you can see from these chapter titles:

1. The new world;
2. Understanding your assets;
3. Harnessing intellectual capital: strategies for optimal law firm infrastructures;
4. Understanding positioning and competitive advantage;
5.Developing a value-added strategy;
6. Alternative Business Structures as a tool to implement strategy;
7. Long term funding of law firms;
8. Mergers and acquisitions;
9. Law firm valuation (Michael Roch);
10. Remuneration revisited;
11. Governance, leadership and management in the changing law firm environment;
12. Summary and Prospects.

Although there's been less coverage of the Legal Services Act of late than when it was first being debated and then adopted in the UK (it actually only applies to firms based in England and Wales), I attribute that less to diminishing interest in the LSA than to the simpler reality that once the fireworks of the debate over adoption had concluded, there is little more to say until we see it kick into action (pending adoption of implementing regulations, probably in the next 12--18 months).

But if you feel the urge to prepare in advance, Nick's book will arm you better than anything published so far.

First, here's a bit more on the broad range of what it covers, and then we'll get to the heart of the matter: What Nick thinks that the "Alternative Business Structures" enabled by the Legal Services Act might look like. From the Law Society publications page:

Strategy for Law Firms guides firms through the strategic options available to them and suggests how they might position themselves to succeed in the market.

The book provides a practical approach that is underpinned by sound strategic and academic principles. The author offers insight, drawn from his vast experience of the legal market, on a range of topics including:

• harnessing a firm's intangible resources and capabilities
• competitive positioning
• the creation of a value added strategic plan
• Alternative Business Structures as a tool to implement strategy
• mergers
• law firm funding and valuations, including external funding
• governance
• profit sharing.

The author has created a new framework with which to analyse and assess your firm's position in the market, and identifies and explains 15 possible models of ABS under the new rules.

Although primarily aimed at law firms in the UK, the book is relevant to legal firms around the world.

Of greatest interest to those of us waiting with baited breath to see the fallout when the LSA takes effect is Nick's proposed taxonomy of "Alternative Business Structures:" What, in other words, he theorizes will arise in the next few years. It's fascinating (see Chapter 6 in general, pp. 89--103).

First, Nick posits three reasons a law firm might entertain launching an ABS:

• A strategy for growth and/or diversification may require more capital than the partners care to or could raise internally.
• They may perceive a need to protect or increase market share by becoming part of a bigger brand.
• They may hope that an ABS will give them a vehicle for recognizing the value of capital they implicitly own in the firm.

He then follows with his taxonomy, which is worth elucidating in some detail:

• Business forms mostly owned by lawyers:
  
  
  • Traditional law firms: There is little real doubt this model will continue, as the attraction of minimal non-lawyer involvement in firm governance is altogether real.
    
    
  • Marketing umbrellas: Here Nick envisions a sort of franchise model where operational decisions remain firmly in the hands of the extant partnership but marketing and branding support is provided by a centralized operation. It's hard to imagine this succeeding, however, without some quality standards being imposed so the hope of minimal operational involvement may have a vanishing half-life.
    
    
  • The full franchise: This builds upon #2 by adding centralized guidance and specifications for systems, processes, and standards that franchisees would be obligated to meet or face expulsion. The benefit to the firm joining the franchise is presumably increased exposure and being able to borrow from the halo of assured-quality granted by the franchise name; the cost is typically an initiation fee and a monthly management fee thereafter.
    
    
  • The roll-up. In this familiar technique, investors--who may be outsiders such as private equity or venture funds or who may be industry incumbents seeking growth--buy a series of firms and re-brand them as their own, potentially consolidating significant portions of an industry in the process. To some extent, we have already seen this. If you doubt me, simply look at the New York or London markets: You will have a hard time finding small, attractive, independent law firms still standing. Amost all have been swallowed by out of town firms or indigenous firms bent on growth. (Parentheticaly, this appears to be the primary motivation for Slater & Gordon, the Australian firm which launched its famous first-of-a-kind IPO two years ago.)
    
    
  • The virtual firm: We have already seen examples of this type of firm emerge and given the relentless march of technology--which excels at enabling collaboration at a distance--we will surely see more. One notable entrant that's up and running is Axiom Legal, which provides on-demand teams of lawyers with premium pedigrees to clients without heavy investment in office space or infrastructure.
    
    
  • Legal multi-disciplinary practices: These got an undeserved and unfair black eye about a decade ago when they were seriously proposed here in the US and strangled in their crib by a combination of the ABA's lobbying "FUD" (fear, uncertainty, and doubt) and the untimely implosion of Andersen Legal, which seemed to prove their inherent risks--although, of course, it proved no such thing.
    
    
• Business forms mainly owned externally:
  
  
  • Integrated MDP's: These would combine a division offering legal services with other divisions offering allied service, such as investment or tax advice, real estate brokering, accounting, and even garden-variety investment banking services. The putative rationale is that clients would appreciate one-stop shopping, but as we've seen over the past decade in the experience of financial "supermarkets," the best that can be said about that model is: Unproven. Indeed, Nick admits that it "could prove to be a regulatory and liensing nightmare as the various regulatory bodies for the different professions involved tussle for supremacy."
    
    
  • Externally financed growth: This is probably the classic vision of firms contemplating outside "sugar daddies" who would come in as minority owners, contribute substantial capital, and not demand a controlling or even important voice in management. The concept is that private equity investors (say) would be willing to take relatively passive roles. Don't count on it. In fact, assume that serious private equity investors will demand majority control, period.
    
    
  • Branded conglomerates: This model starts from the reality that the boundaries of what constitutes "legal advice" are porous. What about tax advice from accountants? M&A advice from investment bankers? For that matter, mortgage or real estate investment advice from real estate brokers? The structure envisioned here is a panoply of more or less related services of which classic legal advice is only one, all operating under a single roof and brand name. A logical place to acquire the legal services component of such a conglomerate would, of course, be to buy an existing law firm.
    
    
  • Law Firm, Inc.: The classic law firm IPO, floating itself on the market. Nick, and I, see very few firms going for this option, and probably almost no firms employing people who might be reading this piece right now. But it remains a sexy option, and doubtless some of the undaunted or (if you prefer) the naive and self-aggrandizing, will try it. All I can say is, hold on to your seats.
    
    
  • The integrated legal network: A hub and spoke model where a centralized provider of back office operations and administrative services would feed subsidiaries (the spokes) with cost-effective services benefiting from economies of scale, while allowing each "independent" firm to operate on its own. Of course, independence is here in the eye of the beholder, and without doubt standardized quality control and other relatively intrusive measures would be imposed. It's hard to envision how any non-commodity law firm would find this feudal kingdom an attractive prospect, but for smaller firms honestly recognizing a shortage of pure managerial talent, it could serve a valuable role.
    
    
• Fringe and other models:
  
  
  • Online firms: My friend Richard Susskind has recently outlined what this creature might look like in his The End of Lawyers? In his vision, the future (I should say, and Richard would say, a future) sees a confluence of disruptive technologies providing automated legal services including document assembly, baseline advice, audits, or simple updates on topics of interest to subscribers.
    
    
  • Not-for-profits: Not a "business" model, at all, in the eyes of born-in-the-bone capitalists, but possibly viable for firms that are willing to pay clients enough to cover out of pocket expenses and able to recruit professionals enlisted in the vision of providing services to their worthy target market.
    
    
  • In-house options: Who's to say that in-house departments couldn't decide to offer their industry-specific expertise outside the walls of their corporation? Although the corporation might not see it as a "core competence" (it's not), if it were viewed as free incremental revenue for a resource that had to be maintained in any event, who's to object? Whether they'd be viewed as serious competitors to dedicated private law firms is another question. The more important question, in my mind, is why a corporation would provide top-notch, or even adequate, industry-specific legal advice to other firms that almost by hypothesis are direct competitors? Nick suggests this idea, but I don't know how serious he is. I wouldn't be.

Nick concludes with four predictions, only one of which I will share with you. For the rest, you need to buy the book. The one? "Pressures on margins will intensify.'

If you want to have intelligent plans for dealing with that prediction, not to mention the other three, perhaps your law firm needs a strategy.

Fourteen years ago, Greenberg Traurig wasn't in the AmLaw 100, and today it's  #10. Their CEO during this entire period--until he stepped down lastweek--was Cesar Alvarez, now age 62. When he became CEO of the firm, it was a "small but prestigious Miami law firm known for corporate and real estate," according to this interview with the Miami Herald, and now is 1,750 lawyers in 30 offices with annual revenue of $1.2-billion.

But you know this. That's not why I'm writing.

When someone with Cesar's perspective and accomplishments steps down, it's worth listening. (Naysayers in the audience--and I know you're out there, admit it!--who think that the Greenberg Traurig model is intrinsically flawed, or that it's a flash in the pan, or that it's unsustainable, or that it's [insert miscellaneous pejorative here], just stay with me. We all know GT is a "polarizing" firm, in that people tend to love it or hate it. That's a topic for another day.)

So let's listen for a moment.

He said two things that struck me:

• "Without our blind compensation system [only Cesar knows what each partner earns], we never would have been able to build this firm;" and
  
  
• "Q: What do you know now that you wish you knew years ago?
  
  "A: How important the culture of a firm is. Sometimes people tell you how critical culture is. When I started, I said culture is a nice thing, but unless you drive success, culture won't mean anything. In fact, I know now that it is the opposite. You need to drive the culture, and culture will drive success."

How could a "blind" compensation system ever work? Isn't more disclosure, more "transparency," today's Holy Grail? Well, not so fast.  As Warren Buffett has famously said:

Our experience is that envy, rather than greed, is the key driver. If you give someone a $2 million bonus but their co-worker got $2.1 million, they're miserable. Of the seven deadly sins, envy is the most useless - it makes you miserable and you lose a lot of sleep.

I couldn't agree more (with Warren, if I'm not yet entirely convinced by Cesar). Few things are more corrosive than the envy of small differences, and we all know that the most visceral rivalries are local.

Does that mean the "blind," cone of silence, system is necessarily right for your firm? Not at all. The answer to that depends on the historic path your firm has taken. For sure, if it's always had an open and "transparent" system, now, and perhaps not ever, is the time to change. But if there's needless neck-biting and back-stabbing thanks to minimal differences in compensation, you might start thinking about migrating in that direction.

But enough on that.

The truly fascinating comment of Cesar's was his about culture, and its primacy over financial performance.

In this environment, people are who are considering lateral moves are not considering them because of, or certainly not only because of, financial performance, but almost exclusively because of culture--the compelling lack thereof.

But "culture" is too often confused with such bland bromides as "collegiality," "support," and "team spirit."

Evidently, that's not what culture means to Cesar, although he doesn't explicitly make the connection. Culture, to Cesar, is a culture of high performance.

First, as to internal expectations (and forgive the extended quote, but it's required to deliver the context and import) (emphasis supplied):

Q: If a young associate comes to talk to you about work life balance, what do you say to him?

A: When I was an associate I wanted to do as many deals as I could as a corporate securities lawyer. I worked a lot of hours: Monday though Sunday. Ultimately you have to sell two things -- for the client to trust you as human being and as a lawyer. If you haven't been at these deals you won't be able to sell yourself to the client. My point to young associates is you have to invest in yourself. What you get paid in the first few years is insignificant.

Today associates want the outside life. You have to remember they have to choose to lead the life of a lawyer, not be here to have the lifestyle of a lawyer. If they want lifestyle without being a real lawyer it will not work long term. It's a business that requires a lot of experience.

Q: Does it require major personal sacrifice to be good lawyer today?

A: Absolutely. Nothing has changed from that perspective. This is difficult profession, period. It requires a lot of time and effort. There are wonderful rewards, but you cannot substitute time and effort, not when someone else is putting in the time and effort.

Many associates still don't believe it. Now they are feeling the recession, the uncertainty. They have never felt the uncertainty. They have always been in a system that rewarded them again and again even when their hours were going down.

Q: Have you seen a change in attitude?

A: Definitely. They realize they are lucky to have a job and are more focused on what they need to do to have their career.

And second, in terms of client expectations:

Q: Do you think the legal profession as a whole will address client expectations brought about because of technology?

A: I think you have to be connected to the client all the time. We're in the business of solving problems. Problems aren't just legal issues. The great lawyers know how to handle problems. You want to be an advisor, not just a technical lawyer. You have to spend time understanding the business of client. You have to invest time and stay connected.

Finally, he has some shockingly clear-eyed observations, firmly grounded in economics, on what's going to happen to the next few years of law graduates and young associates. Specifically, when asked what's going to happen with the "tremendous number of unemployed lawyers," he responds with a clarity worthy of Adam Smith:

The economy deals with supply and demand. The adjusting mechanism is price -- what they will be willing to be employed at and what we can charge a client for them. Once that comes into balance again, you will have a different issue. [...]

If I were a young lawyer and displaced from a large firm, I would be going into one of new areas and be at the ground floor. I'd be learning energy policy and how it works. A few years from now you will become very valuable to law firms. You could come back at a high level if you focus on areas that are new. Firms will always be buying expertise.

So:

• Consider the corrosive effects of envy.
• Economics matter, but a high-performance culture matters more.
• And this profession demands hard work: Always has, always will.

And one last consummately clear-eyed Cesar-ism (from a personal conversation, not this article): When asked about the PPP arms' race, he cogently observed: "The only thing that matters is profits per me."

Thanks, Cesar.

The final agenda for the "Business of Law" program, this coming Monday, February 1st, at LegalTech/New York has just been released.

Please take a look here, and sign up here.

Hope to see you there!

If we were in Corporate Land, this would be the beginning of earnings reporting season, with the close of the customary calendar year-fiscal year for most of BigLaw.

It's too early to draw any statistically solid conclusions about what 2009 looked like overall, but sometimes a report raises so many more questions than it answers that it begs for a bit of comment, analysis, and "deconstruction," if you will.

That would surely appear to be the case with Sonnenschein's reporting.

Here's the headline, from The American Lawyer:

Profits per equity partner dropped 3 percent at Sonnenschein Nath & Rosenthal in 2009, according to figures reported by the firm late Thursday, and gross revenue was flat. PPP fell from $804,000 in 2008 to $780,000 last year. Gross slipped from $473 million in 2008 to $472.5 million, according to the firm.

So far, so innocuous. But if you read a bit more carefully, there's more to the story.

First of all, Sonnenschein added 100 lawyers from Thacher Proffitt effective January, 2009. To add 100 lawyers and be "very pleased" that gross revenue was flat must establish some new apogee or highwater mark in redefining "the new normal."

Second, the decline in RPL (using an apples-to-apples, same accounting method comparison, of which more momentarily) is -11%. This is can only be viewed as a quite negative indicator which suggests the firm, despite going through three rounds of personnel cuts in the past 18 months, may not yet be "right-sized" or certainly is not achieving pre-bust utilization rates.

Third, PPP dropped more than 12% in 2009 vis-a-vis 2008, and now we are told it dropped another 3%. But I understand that partners have been told that cash distributions to them are off 19%. This doesn't quite compute if PPP is actually down just 3%, unless something strange is going on with "cash."

Which brings us--fourth--to the weirdest and most inexplicable part of the Sonnenschein news (emphasis supplied):

The firm also restated its 2008 gross revenue numbers Thursday. Last year the firm reported $492 million in gross revenue in 2008, but yesterday Sonnenschein lowered that figure to $473 million. The firm attributed the discrepancy between the two figures to a change in accounting. Sonnenschein previously reported gross revenue on an accrual basis, but now reports it on a cash basis...

This is a firm founded in 1906, which has used Arthur Andersen and now McGladry Pullen as accountants. Why would this be the year they would change accounting methodology? I have no inside information as to why that might be the case, but it strikes me as oddly convenient that the change in stated 2008 gross revenue from $492-million to $473-million quite nicely enables them to say that revenue in 2009 was "flat" at $472.5-million.

Well, aren't revenues revenues? And isn't the cash basis more rigorous than the accrual basis? Yes, and yes.

First, I for one can't imagine advising a client to "restate" revenues, any more than I can imagine restating a budget once it's set. You can miss the budget or exceed the budget, but the budget is the budget. In my book, rewriting history just shouldn't be done, however tempting it might be to succumb to the desire.  States that do this are rightly accused of Kremlinology.

And second, as for whether cash recognition of revenues is more disciplined than accrual, the short answer is of course it is. You either have the check in hand by midnight December 31st or you don't. No squishiness or wiggle room to that. No woulda-coulda-shoulda.

But ponder for a moment the other side of the Income & Expense statement: Expenses. If you were recognizing expenses on an accrual basis (conservative accounting), but now you only recognize them on a cash basis (more aggressive accounting), voila, I can virtually guarantee you that reported profits will go up. (At least as a one-time shot, but that's a story for another day.)

Now, please understand: I have no brief against Sonnenschein in the least, and I wish the firm, its clients, its partners, associates, staff, and their many dependents all the best in these times of unprecedented difficulty.

Sometimes, however, you have to look behind the story. If there are innocent and plausible explanations for all of this, I welcome them and will publish any comments I receive as updates to this piece (assuming the writers' permission).

In the meantime, take what you read with a grain of salt. Or better yet, a nod to critical thinking.

---

The link to the American Lawyer article on Sonnenschein's reporting appears to be intermittently broken, so here's the original article. If I've offended "fair use," I apologize forthwith to the American Lawyer but the thing about the Web is that links should work.

---

The Am Law 100:
Sonnenschein Profits Drop 3 Percent

The American Lawyer

By Ross Todd

January 22, 2010

 

Profits per equity partner dropped 3 percent at Sonnenschein Nath & Rosenthal in 2009, according to figures reported by the firm late Thursday, and gross revenue was flat. PPP fell from $804,000 in 2008 to $780,000 last year. Gross slipped from $473 million in 2008 to $472.5 million, according to the firm.

"[The] bottom line for us is that we are very pleased with the performance in view of the substantial investment we made in January of 2009 to add 100 new lawyers from Thacher Proffitt," Sonnenschein chair Elliott Portnoy said via e-mail Thursday. Portnoy (pictured at right) was traveling and unavailable for a phone interview.

Last year marked the second straight year of lower profits at Sonnenschein; PPP dropped more than 12 percent to $804,000 in 2008. The firm also restated its 2008 gross revenue numbers Thursday. Last year the firm reported $492 million in gross revenue in 2008, but yesterday Sonnenschein lowered that figure to $473 million. The firm attributed the discrepancy between the two figures to a change in accounting. Sonnenschein previously reported gross revenue on an accrual basis, but now reports it on a cash basis to match the method it uses to report net distribution to partners. The change in accounting affects Sonnenschein's revenue per lawyer numbers. The firm reported Thursday a drop of 7 percent from $778,000 in 2008 to $722,000 in 2009. When using the numbers the firm reported last year, the drop in RPL is 11 percent from $808,000 to $722,000.

Part of the RPL drop can be attributed to Sonnenschein's boost in head count. The firm grew from 608 lawyers in 2008 to 654 in 2009. On January 1, 2009, Sonnenschein added 100 lawyers from New York's Thacher Proffitt & Wood, including 40 partners. The hires--the largest lateral group the firm has taken on--nearly doubled the size of Sonnenschein's New York office.

The Thacher Proffitt lawyers brought with them a $500,000 contract awarded in December 2008 by the U.S. Department of the Treasury to advise on its investments in the Federal Reserve's Term Asset-Backed Securities Loan Facility (TALF). In March, Sonnenschein was chosen along with Cadwalader Wickersham & Taft and Haynes and Boone to advise the Treasury Department on its role in last year's auto industry restructurings. The auto industry contract carried a ceiling value of $8.59 million.

Sonnenschein, like many firms last year, also employed a number of cost-cutting measures. The firm cut associate compensation in June and announced in December that it would roll out a new merit-based associate compensation structure in early 2010. In September the Am Law Daily's colleagues at The National Law Journal reported that the firm cut about 30 lawyers, including 10 income partners--the third series of personnel cuts at the firm in an 18-month period.

 

This report is part of The Am Law Daily's ongoing Web coverage of The Am Law 100's 2009 financials. Results are preliminary. Final rankings and full results for The Am Law 100 will be published in The American Lawyer's May 2010 issue and on AmericanLawyer.com. The Am Law Second Hundred will be published in the June issue.

Speaking of interesting conferences in New York, on Monday, February 1st, from 1:00--5:00 pm, LexisNexis is hosting a "Business of Law" Symposium at the New York Hilton, Sixth Avenue @ 53rd Street, home of the annual LegalTech confab, which this flies under the flag of.

Why do I mention it?

Because I'm giving the keynote, called Economic & Strategic Perspectives on the Current Environment, and I'll also be moderating the three subsequent hour-long panels, on:

• Knowledge Management:  How technology can drive competitive differentiation.
  
  
• New Structures for the New World?:  Addressing what components of the conventional law firm business model might need to change, including:
  • Associate career paths
  • Alternative fee and billing models
  • Revenue and profitability models
  • Lateral recruitment, and improving the batting average, and
  • Law student recruiting--taking on the NALP menace
    
    
• Future Strategies:  If growth for growth's sake is no longer the universal solvent we once perceived it to be, what new strategies are plausible, effective, and needed in the marketplace? 

If I may say so, we've also recruited some top-drawer talent for the panels, including Harry Trueheart, Chairman of Nixon Peabody, Bill Bachman, Chief Operating Officer of Bingham McCutchen, Sally King, Regional Chief Operating Officer of Clifford Change, Aric Press of The American Lawyer, David Lat of Above the Law, Oz Benamram, Chief Knowledge Officer at White & Case,and Saul Rosenberg, Director, Knowledge Operations, McKinsey & Company--as well as many talented others.

Bonus for attendees:  Audience members will be given wireless polling devices allowing you to vote anonymously and see the results displayed in charts at the front screen in real time.    Accordingly, each session will feature several questions for the audience designed to enlighten, or perhaps uncover latent inconsistencies in attitudes.

There's no special charge for the event:  More info here. 

Hope to see you there!